Effen

Can you be more specific? Can you tell us exactly how the new formula would work. Not sure what you mean by "add-on" benefit.

Is this a real life situation? Are you saying an employer bargained to be in a multiemployer plan, signed a 2-year agreement and now is bargaining to get out? I would think you would use a zero, but I also don't know if this could really happen.

I am not sure the union has any choice. I don't recall that they have to sign anything. Typically, this is just adopted by the employers. The union created the options.

Ok, looks like there are various possibilities. I think the answer to the OP is "yes". If you are covered by the PBGC, you are subject to the AFN requirements. I didn't see any exemption for 5500 EZ filiers. [80 Fed. Reg. 5625] The annual funding notice requirements apply to any defined benefit plan to which Title IV of ERISA applies (i.e., they are covered by the PBGC). An owner-only defined benefit plan is not covered by ERISA and so is not subject to the annual funding notice requirement. In addition, a defined benefit plan that is not covered by the PBGC is also not subject to the annual funding notice requirement.

I agree with mps, it doesn't seem possible to have that scenerio.

ya, well, I am calling BS.... If the plan's funded status was below 60%, then yes, the plan was frozen by statute (the actuary didn't "do it"). However, you were definitely required to be notified at the time of the freeze, and some say every year thereafter that it was below 60%. If it was frozen for this purpose, once the funding level increased above 60%, it was automatically unfrozen (by statute), unless the sponsor amended it to keep it frozen. Again, a required notice. It sounds like you at least know the reason for the freeze, now you just need to find out if it should have been automatically unfrozen at some future date. The plan document will determine if you get those frozen accruals back. Make sure you attorney requests the AFTAPs for every year since 2008. This could be sloppy work by the actuary, but it could also be a deceitful plan sponsor.

I am not sure how the DOL/IRS would actually handle this. The is from the Pension Answer Book: If the 204(h) notice is not provided and the failure to provide is egregious (i.e., was intentional or failed to provide most of the required information), the participants and alternate payees are entitled to their plan benefits without regard to the freeze amendment. [Treas. Reg. § 54.4980F-1, Q&A-14] Whether a failure to provide the 204(h) notice is egregious or not, an excise tax of $100 per day applies for each failure to provide the notice with respect to any participant or alternate payee who should have been provided the notice. However, the tax will not be imposed if reasonable diligence was exercised to meet the notice requirements and either the employer did not know of the failure or corrected the failure within 30 days of the date the employer knew, or should have known, of the failure by exercising reasonable diligence. Further, if reasonable diligence was exercised, the excise tax for failures in a taxable year is limited to $500,000. Also, the IRS may waive all or a portion of the excise tax under appropriate circumstances. [I.R.C. § 4980F; Treas. Reg. § 54.4980F-1, Q&A-15] A plan that terminates in a standard termination (in accordance with Title IV of ERISA) is deemed to have satisfied the 204(h) notice requirement not later than the proposed termination date and no additional benefits are required to accrue after the proposed termination date on account of ERISA Section 204(h) or related Code Section 4980F. [Treas. Reg. § 54.4980F-1, Q&A-17(b)] I always "thought" the solution for a late 204(h) notice was that the plan wasn't actually frozen until the 204(h) Notice was issued, however it appears that is only in egregious situations. If you can prove the 204(h) was not issued, you then need to prove they intentionally withheld the information. This seems likely since they continue to check the box on the W-2 (although different opinions about that also can be found). Seems like you are on the right path.

Same as Dave - MyPAA exclusively. We probably error on less hand-holding, but we can give more hand-holding if needed. Our clients eventually seem to be fine with it.

Perfect! Thank you.

Thank you. That is exactly what is happening. The Plan (and all Sub 2 benefit liability) is staying with Sub 1. Can you point me towards anything official that I can show the attorney?

Company A owns 100% of Sub 1 & Sub 2. Sub 1 & Sub 2 sponsor a DB plan that requires a separation from service to receive retirement benefits. Sub 2 is sold to an unrelated party and leaves the controlled group. Can those employees of Sub 2, who have attained early retirement age, receive a distribution, even if they are still employed by the company formally known as Sub 2? Does the sale to an unrelated party result in separation from service and permit the plan to pay the distributions?

I agree with Mike, I would not refile. This kind of thing happens all the time with larger plans. Just make sure to report it correctly on the 501.

I don't work on any funds that prepare a true actuarial valuation for the health fund. The only actuarial report that is prepared relates only to the post-retirement benefits and likely has very little information about the actives plan. Since the 5500 and audit report are in the public domain, why not give them a copy (or point them to the DOL website) as they would have more relevant information.

A lot depends on the funded status of the plan. If it is underfunded, they would likely not permit this as they need the continued participation to help them recover. As David mentioned, adverse selection would hurt them. All of the younger members would likely opt out in favor of some sort of DC plan. That would leave the fund with only older (ie expensive) participants and would throw the contribution rates out of balance. Also, this could be a double edged sword for your employer as it could trigger a partial withdrawal which could cost them more than they are trying to save. A lot of unknowns. If i was the actuary for the fund I would tell them to reject the offer. If I was consulting with the employer, I would tell them not to expect a favorable response. It might be helpful to seek out an actuary who works with multi-employer plans to help you with the consulting.

What you described would not be a problem. It is very common for cash balance plans to have different formulas for different people.

There was a lot of talk about the IRS going to a generational table for lump sums in 2018, which may have pushed lump sums up by 5%-10%, but the final regs came out and they stuck with the same methodology they have been using. I would expect the mortality change to be only 1% or 2%. He really should be watching interest rates. They are much more dynamic and have a much larger impact. If rates are lower in 2018 his lump sum will be higher, if rates are higher, his lump sum will likely be lower, even with a mortality update.

That sounds like a question for the attorney.

No such restrictions in a qualified ERISA plan, but there might be offsets for Social Security and/or Medicare benefits. Since there is no in-service option, they will likely need to suspend his retirement benefit if he comes back to work. If it is a bonafide consulting arrangement, then probably no problem - but the facts matter. If he wants the guy back, best option is to amend plan to allow for in-service @ NRD, but that would need to be available to everyone.

It is a facts/circumstances standard. First, what does the plan say about in-service distributions. Some plans permit employees to receive retirement benefits upon attainment of Normal Retirement without a separation from service. If you plan permits this, than it becomes a non-issue. If your plan requires a separation from service, then the fact/circumstances kicks in. What was the participants intent when they left employment in December. Did anything change in January that caused them to return to work. Is it a real "consulting" job, or does the sponsor still control the "consultant". I wouldn't be worried about the personal/sick time, but you might want to make sure the benefit was calculated with the correct compensation and service and that the additional comp/hours won't impact the benefit. The "re-hire as a consultant" might be a more sticky issue, especially if it was pre-planned and the employee really just wants to keep working and collect a retirement benefit at the same time.

Talked a little more with the sponsor. The plan is currently 80% funded, so they would like to pay lump sums of 80% value (based on a interest rate still to be determined), no spousal consent, no relative value. Is this a common approach? I assume it is "legal", but it doesn't feel quite right.

I am working with a non-electing church plan with a number of terminated vested participants. We are contemplating offering a lump sum window. Is there anything special about church plans that we need to be careful about related to a window? For example - Do I need to use 417(e) rates as a minimum lump sum value? Do I need spousal consents? Do the QPSA rules apply? Would I need to offer immediate annuities? I recognize some of this will already be addressed in the plan document, but since I haven't seen the plan document yet, I am just thinking about possible issues. I am wondering if anyone has worked on any lump sum windows for a church plan and if they encountered anything out of the ordinary because it was a church plan?

If they are applying for the 10 year extension, it looks like the financial disclosures are required if you are a "principal employer". Following is a excerpt from 2010-50:

Hmmm, I found the presentation you referenced. Let me do a little digging. Either way, it still sounds like you have a problem, but the magnitude may change depending upon BOY or EOY valuation.

Ahhh, what "automatic approval"? Sounds like you have some problems. In this situation we would have done an EOY val on the date of termination and prorated the SC and Amort, if any. They need to make their final MRC and plan termination is not an excuse, although it does stop the 10% excise tax. In essence, if they can't afford to deposit he entire MRC, they need to pay a 10% excise tax on the piece they didn't contribute. Not perfect, but at least the termination stops the annual penalty. No, you can't ever recognize a reduction in benefits for MRC. It is only used at the time of distribution of assets upon termination.

Yes, we file them before the termination date all the time. No issue with the PBGC or IRS.